IRS Notice CP521: Why Is The IRS Sending You A Monthly Bill

Logan Allec, CPA

Founder of Choice Tax Relief · Over 140,000 YouTube subscribers covering IRS and state tax relief, unfiled tax returns strategies, and general tax strategy.

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IRS Notice CP521 is the notice the IRS sends to a taxpayer to inform them that their monthly payment for their installment agreement is due.

An installment agreement is an agreement with the IRS and the taxpayer to pay off their debt in small payments over a set period of time.

Here is a redacted Notice CP521 that the IRS sent to one of our clients. 

IRS Notice CP521 At a Glance

Table Needed

IRS Notice CP521 Explained, Part by Part

Here is a full explanation of the Notice CP521, part by part.

Part 1: Monthly Payment Due

First, the IRS gives you a description of how much you owe it on your installment agreement. It will have the amount you owe, with the payment due date, and the minimum payment due.

The payment is usually due 9~ days from the date of the notice. If you cannot afford to pay your minimum payment, you may need to call the IRS to renegotiate your payment plan.

Part 2: What the IRS Says You Need to Do Immediately

Next, the IRS will tell you what you need to do immediately. Since you’re in an installment agreement,  you will need to continue making your minimum payments to keep the agreement active.

You can either use the provided payment coupon or pay online at their provided website.

Part 3: Payment Coupon

Then, the IRS provides a payment coupon for you to pay off your balance via check or money order. When doing so, do not forget to make it payable to the United States Treasury.

You also have to add your TIN, taxpayer year, and form number on the payment. When everything is in order, mail it to the provided address.

Part 4: Payment Options

Next, the IRS will provide options for payment on the balance. You can either pay online or via the provided payment coupon.

If you cannot pay it all off, then you can negotiate an offer in compromise (OIC) or a temporary collection delay. These are both options to help alleviate the tax debt further. An OIC allows the taxpayer to settle their debt for less than they owe, while a temporary collection delay halts any IRS collection advances for a predetermined period of time.

Part 5: If The IRS Doesn’t Hear From You

Next, if you fail to make your payment on your installment agreement, then you run the risk of defaulting. Defaulting on the agreement will most likely result in paying a fee to reinstate it.

At worst, the IRS will take more drastic action as a result of a broken agreement.

Part 6: Installment Agreement Summary

Next, you’ll get an installment agreement summary. The summary will show the remaining balance and any penalties you may have incurred.

In this case, the installment agreement covers the 2022 1040 form. There is both a failure to pay penalty and an interest penalty. It will have changed from the previous balance since the payment will have been applied.

Part 7: Penalty Fees

Since the IRS is required to charge you penalty fees, they will then provide a description of the penalties against your account. There is a Failure to Pay Penalty for not paying the balance on time. It is a 0.5% monthly penalty for each month the fee is late. However, it will not exceed 25%.

If there is an intent to levy, and the balance is left for more than 10 days, the penalty increases to 1% per month. If there is a Notice of Intent to Levy, you will receive information on how to appeal.

On the flip side, if you are consistent and pay on time, the penalty decreases to 0.25% per month while still on the approved track for paying off your Installment Agreement.

However, if you cannot pay off your penalties, it is possible that you can appeal each penalty charge individually. You will need to provide signed documentation of extenuating circumstances resulting in the need for alleviation from the penalty fees. You will also need to provide a signed statement and supporting documents for each penalty abatement request.

Part 8: Removal Of Penalty Fees Due To Erroneous IRS Advice

Then, the IRS will provide a disclaimer about its penalty fees. There are exceptions to everything; the IRS is no exception. If one or more of the following criteria apply to you, there are grounds to remove your penalty fees.

• You wrote to the IRS for written advice on a specific issue.
• You provided the IRS with adequate and accurate information when asked.
• You received written advice from the IRS.
• You reasonably relied on the IRS’s written advice, but were penalized anyway.

If any of those conditions apply, we urge you to submit a Form 843 (claim for refund and request for abatement) as soon as possible. This should be mailed to the provided address. Additionally, you can also call the IRS at the number provided.

Part 9: Interest Charges

Next, the IRS will break down your interest charges.

It is required by law to charge interest when the liability is not paid on time. The rates may vary, but it is usually a monthly charge on the outstanding balance. The letter will show the periods for which the taxpayer is being charged alongside the interest rate.

If you have any questions or want to dispute the charges, the IRS provides a phone number where you can contact them.

Part 10: Money Saving Tips

Next, the IRS will give you instructions on how to access your payment plan online. On their website, you will be able to do the following.

• Submit your payment online.
• Change the due date of your payments.
• Get a payoff amount.
• Created a Direct Debit Installment Plan to automatically submit your payments for you.

They also advise you to increase your monthly payments. If you can afford to do so, we also advise you to increase your monthly payments. This will minimize the amount of fees you pay in penalties and interest.

Part 11: Additional Information

Lastly, the IRS will provide you with additional information. As is with most of their forms, they will provide a link to their website with more information. We linked that here.

You can also receive information on various tax forms, instructions, and publications by calling the IRS at the provided number or on their website.

If you choose to mail the IRS any information, do not forget to include your TIN, tax year, and the form that you’re contacting them about.

What You Should Do If You Receive a CP521

Below are steps for you to take after you receive a CP521 Notice from the IRS.

Step 1: Follow Up If You Think There Was A Mistake

If you believe there is an issue with your payment, contact the IRS sooner rather than later. The IRS makes mistakes, so it’s up to you if you believe there was an error with the changes against your account.

You should always double-check to make sure the IRS hasn’t made an error on your account.

Did you already pay off their balance, but the IRS hasn’t processed it?

If you found an error, then call the IRS as soon as you can. It likely won’t be an easy process, but it’s very necessary to protect your money and your account. Since it’s difficult and annoying, Choice Tax Relief offers this service to our clients.

Step 2: Pay Off Your Balance

If you haven’t found any errors, then you should pay off your balance as soon as you can in order to ensure you don’t default on your Installment Agreement.

In fact, if you can afford to do so, it’d be wise to increase your payments so you pay off your debt faster.

Step 3: If You Cannot Pay Off Your Balance

If you cannot afford to pay off your balance, you can apply for an Offer In Compromise (OIC). That is an agreement the taxpayer makes with the IRS to settle their debt for less than they owe. While it’s not a guaranteed option, it’s always worth trying.

If the OIC isn’t a feasible option, then you can apply for a temporary hardship placement (called currently not collectible status). That will halt the IRS from taking any action for a predetermined period of time.

While it doesn’t get rid of one’s outstanding balance, it does allow for some time to save to prepare to pay off the debt.

Where to Go From Here

If the monthly payment on your installment agreement no longer fits your budget, the amount can be renegotiated rather than simply missed.

You may also receive Notice CP521D, which is the version of this notice the IRS sends about a different installment agreement balance.

Falling behind on the payments is what puts the agreement at risk of default, so it is worth addressing before that happens.

We know how to work out an arrangement the IRS will actually accept, and you can start with a free consultation.

Author:

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Logan Allec, CPA, Founder and Owner

Logan Allec has been serving taxpayers as a CPA for over 14 years. After leaving his role at a "Big 4" firm, he started Choice Tax Relief to help everyday Americans who have found themselves behind on their taxes. He also educates thousands of people daily about tax relief on his YouTube channel. In addition to his CPA license, Logan also has a Master's Degree in Taxation from the University of Southern California (USC). He lives with his wife and children in the Los Angeles area. Learn more about Logan here.

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